Change of guard ready to lead JSE to further success

The recent year end results of the JSE to the end
December 2010 were overshadowed by Russell Loubser announcing that he was
standing down as CEO of the JSE at the end of the year.

This was a sad moment for the JSE as for the last
15 years Russell was a successful and innovative leader who led the JSE from
strength to strength. He never failed to make courageous decisions when
necessary. During his term he led the JSE from being a small, backwater local
exchange to becoming a recognised and respected international player. It is
significant that he took the decision to stand down not because he thought it
was time to go but because he felt that it was important for the JSE to elect a
new leader to take it through the next decade.

We have been successful I believe in choosing the
new leader. Nicky Newton-King has been groomed for this position as Deputy CEO
under Russell for the last eight years. Nicky, a lawyer, was a partner at
Webber Wentzel Attorneys before joining the JSE 15 years ago. Together with a
number of other high quality candidates she underwent a rigorous vetting process
and in the end she was the JSE Board’s unanimous choice. The JSE will therefore
be in capable hands in the foreseeable future and I also look forward to
following Russell’s future career path with great interest.

The JSE financial results for 2010 are now
history but I would like to point out that they were achieved in a difficult
trading period and were a tribute to all concerned. For the record the exchange
reported a 9% rise in operating revenue for the year to end December 2010 of
R1,3 billion with net income after tax R378 million, compared with R366 million
the previous year. I was particularly delighted that we managed to increase our
dividend to R2.10 (2009 – R1.92) as I am well aware that there are a number of
JSE shareholders who look to the JSE for their income.

Readers may not be aware that Russell Loubser is
both a Director and the Treasurer of the World Federation of Exchanges (WFE).
The WFE is the association of 52 regulated exchanges around the world which
develops and promotes standards in markets. WFE exchanges are home to more than
45 000 listed companies. Obviously Russell is highly regarded in international
stock exchange circles as well as in South Africa. It is therefore fitting that
in his final year as the JSE’s CEO that the WEF has voted to hold its
51st General Assembly and Annual Meeting in Johannesburg, October 11
to 13.

This assembly represents the largest and most
widely attended gathering of global exchange leaders. It is also attended by a
number of prominent international business people and government dignitaries. I
personally regard this as a milestone in South Africa’s business history and is
something that Russell and I have been lobbying for over the past 12 years.

Mining Indaba

Soaring commodity prices led to a buoyant and
optimistic mood at this year’s Mining Indaba in Cape Town. For local delegates
it was gratifying to experience the global interest in the resource-rich African
mining sector. A delegate told me it was “like lions fighting over a kill”.

Clearly there is an increasing appetite for
Africa as an investment destination as low yields in developed countries prompt
investors to search for high returns in previously unexplored emerging markets.
I believe that Africa contains over 30% of global mineral reserves but has less
than 5% of global exploration and extraction budget. What does this mean for
stock exchanges on the continent and more pertinently for South Africa’s ability
to attract new investment?

When global fund managers consider putting funds
into a new destination they look for a number of criteria including a sound,
business friendly economy and, for listed investments, a stock exchange with
regulatory and operational standards which meet international benchmarks.
Exchanges must have a predictable set of rules, fair operating schemes and
smooth and transparent operating systems. If these factors aren’t present
other investment destinations will be found.

A major hurdle for investors wanting to put
money into Africa is the difficulty involved in transacting on a large number of
small exchanges, some with as few as five listed companies and each with its own
regulatory system – often very different from the regulatory systems investors
are used to. For multi national institutions the effort required to investigate
each market is not always worth the effort given the low number of potential
investment opportunities and the relative high costs of executing trades in
these markets.

As the largest exchange in Africa the JSE has
always believed that it has a pivotal role to play in the development of capital
markets throughout the continent. We have positioned ourselves as a gateway for
investors worldwide wishing to access opportunities throughout the African
continent and have developed the strategic links and technological capacity to
do so.

In February 2009 we established our African
Board, a listing venue for companies domiciled in Africa or with assets on the
continent. Because we realised that turf issues are a major stumbling block we
encouraged companies to dual list on the JSE as well as their local exchange as
this will offer them increased liquidity in their shares and visibility to more
investors through exposure to the JSE’s large local and foreign investor base.
Moreover we will share our revenues with the local exchanges.

We have also launched a series of indices to
track the performance of top issuers across the continent and are developing a
hub and spoke model of linking and routing orders and data to and from African
exchanges.

South Africa is blessed with staggering mineral
wealth. For more than a century our economy has been built on these vast
resources. Our mining industry is well established and resourceful with a high
degree of technical expertise and an ability to mobilise capital for new
development. It has contributed greatly to the establishment of our country’s
secondary industries. Resource stocks comprise approximately 40% of the JSE’s
value.

However if we wish to benefit from the momentum
created by foreign interest, create jobs on a sustainable basis and not miss
out on the next commodity boom the government must be pro-active.

The best input the state can provide is to sort
out once and for all a transparent regulatory framework for the mining sector
thereby creating an environment for the mining sector to flourish. Secondly it
needs to accept that a market economy, with all its imperfections, is the only
kind that works. It has had very little success with state owned mining
companies like Alexcor and should remain a facilitator and not try and be a
player on the field. It has enough on its plate in trying to fulfil its core
obligation of rendering public services. Once these issues have been addressed
I have no doubt that the minerals under our feet will keep our economy robust
for at least another hundred years.